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Saturday, January 9, 2010

Forex trading system is the subsystem of the forex trading plan which governs when and at which price you open and close your trades. A trading system works on the signals given by technical analysis and/or fundamental analysis. Any currency trading system prevents information overload by filtering out the universe of technical and/or fundamental signals in such a way that only the most reliable (successful in the past) signals or signal combinations.

There are two kinds of trading systems.the discretionary and the mechanical. Discretionary trading systems expect the trader to use his or her own judgement to ascertain the importance of each of the technical or fundamental signals that he or she gets. Mechanical trading systems operate on a fixed number of technical or fundamental signals without the participation of the trader. Discretionary trading systems require the perpetual application of creativity from the trader in the understanding of the changing market conditions. Mechanical trading systems require the creativity from the trader only in the forex system development phase.